8 factors: Retail business strategies for the digital natives/generation Z

As Gen Z slowly grows to make up the majority of the market, it will hold most of the buying power globally. Retail businesses will need to re-align their methods keeping in mind this tech-savvy generation's spending habits.

Who really?

Digital natives, a generation born into the face of both parents and a camera, inherently understand the world through its lens. For these young new consumers, also known as Generation Z, their smartphones grew into an extension of their own arms, and the ability to manoeuvre and manage them just as natural.

Born between 1994 and 2010, they represent 25.9 percent of the world’s population. Generation Z is an innovative bunch, born consuming information with a global reach and already accounting for $44 billion dollars of consumption, which barely scratches their projected consumption of $200 billion by 2018. As for family spending, they already influence a staggering $600 billion. In terms of population size, this means they will go from their current 26 percent of total population to 40 percent by 2020—nearly half of the total population.

Armed with their smartphones, digital natives have the pocket-sized power to search for top-tier quality at the best price. They quickly evolved from the naïve idealism of millennials into proactive, pragmatic shoppers. Struck with the reality that their peers are just as talented as they are, this groups understands the need for individualism in an increasingly globalised world. They are willing to seek out the best for themselves and understand the importance and difficulty of a truly unique design or product.

This digitalisation of the world of buying and selling has revolutionised the very nature of consumption. With a few clicks on a keyboard, you can have all of the life’s necessities at your door. At a time where groceries have become deliverables, the only foraging that happens is for the best deal. When your consumer has the world of competitors, reviews, and your business history at their fingertips how do you entice them to your brand?

Here are eight factors that retail businesses should ponder on for their Gen Z strategies:

1. Millennials idealism to native practicality

Generation Z or Gen Z has grown up surrounded by millennials, watching their mistakes and learning from them. This group has seen firsthand that hard work is required to make a real difference. Economic uncertainties, wars, terrorism, and high student debt rates mean this group is not as willing to take risks as millennials. Digital natives hold practicality above idealism or comfort. They are more aware than any generation that diversity is essential and are willing to work towards a brighter, equal, cleaner future. Through technology, this group grew up immersed in a global conversation.

This globalization means they recognise the importance of individuality. Through social media accounts, this generation is constantly connected. They are constantly feeding information to their peers about each incredible aspect of their lives. This has led Gen Z to value face-to-face interaction and tools like Snapchat, Hangout, Facetime, Kik, Whisper, WhatsApp and even Skype, which facilitate actual real-life connections.

Generation Z is full of self-starters. They see the potential of education through technology and are more likely to seek internships and work right away before taking the more expensive higher education paths. Even in India, we see Gen Z bringing in self-earning opportunities like setting up a small trinkets stalls, a lemonade station, working at McDonalds or even sports shops like Decathlon and such, all to bring in early money and an idea of financial independence.

Digital natives as consumers place practical companies with a global mission above the latest fashion. This sets up trends for future consumption to focus on social impact rather than cheap marketing ploys.

2. Diversify to personalise

Technology enables the exposure of young people to global trends from an early age. At their fingertips, there is the power to compare and analyse the best deals and designs from across the globe. This power of choice will ultimately shape future trends. A worldwide study found that 58 percent of individuals over the age of 35 agree, “Kids today have more in common with their global peers than they do with adults in their own country.” This level of connection and globalisation is unique to digital natives. Diverse styles ranging across countries culminate to create an expectation for brands to offer the chance for unique individuality.

This ability to find and define the latest fashion comes hand-in-hand with the knowledge that a better deal may be looming on the horizon. Digital natives have an awareness that the possibility of finding the best price and potentially a better style could be just a few clicks away. When you have the power to research every option for dinner, flights, or a simple t-shirt, the need to make an informed decision becomes second nature.

Generation Z as consumers are pragmatic seekers of individualised style. While working to define their own signature style, they will not settle for the traditional marketing path filled with gimmicks or the tired one-liners.

To this group, brand loyalty is as archaic as cave paintings. When the entire world of fashion is at your disposal, settling on one brand for all your needs is the equivalent of getting all your produce from a vending machine. Variety really is the spice of life for digital natives—they do not want your bland sweater vest. They are searching for eclectic blends that go beyond the future businessperson, the laid-back bohemian, and the classic black dress purist. If you are an apparel business, your brand should bring these styles together to cultivate something fundamentally new and daring. Limiting a look targets only the niche, but opening up the styles to the bizarre allows the consumer the chance for a perfect match among the mismatch.

3. Buy into practical pricing

Digital natives are just hitting the market, so their likelihood of affording designer wear or holding loyalty to one brand above all others is incredibly low. They simply cannot afford it. They were born looking at alternative lifestyles, fashions, products, platforms, and community on a global scale. This perspective means it doesn’t impress them that something is expensive, it impresses them that something is new or stylish at a reasonable price. Their formative years, during the economic recession of the early 2000s, means they understand financial insecurities. For marketing, this means you need creative tactics like a flash sale of your products or giveaways to increase appeal. Keep a tab on Levi's here?

The fashion editor at Elanstreet, Sohini Dey, describes this thought process in an article* by DNA: “Gen Z are constantly in touch with international fashion trends, new style inspirations, and it’s an age when one is constantly ready to try new things. Achieving brand loyalty is really only possible once you’ve reached an age when you’re sure of your personal style and know exactly what works for you,” she says.

Just because affording the design chic is not always an option for Gen Z now, it doesn’t mean these soon-to-be entrepreneurs probably won’t be purchasing Chanel in a few years. Since this is such a large generation, their spending habits now already account for $44 billion a year. Also, many of them are already in college and their pragmatic nature is sure to lead to a lucrative career.

Offering a few giveaways or competitions to win high-end designs will keep them coming back for more later in life. Shaping your business strategy to suit this group is definitely going to pay off in the long term.

4. Experiential shopping

Generation Z grew up understanding that shopping is easily possible from the comfort of one’s own bed. It is no longer about outshining your competitor’s window display so much as the allure of their homepage. With this group, the tangible store experience becomes mundane, perhaps a bit outdated, and simply inessential. This is where the whole idea of an experience comes into play. If you can captivate and enchant at both the threshold of the store and the virtual domain, digital natives are sure to notice. Phygital though a passing concept for the millennials, is sure to bounce back for the Gen Z. You should hang on before you scrap that plan for the magic mirror from your strategy.

Stacey Ferreria, the creator of Quartz, a business website, gives insight into this phenomena in the same article* by DNA, “Gen Z uses stores as showrooms, so retailers better provide an amazing experience. If you interact with a friendly salesperson who consults on, say, an outfit for an upcoming job interview or the best phone to buy, you’re much more likely to develop an affinity for the brand and buy those products.”

This generation has seen it all, so show them something they haven’t, or at least make them feel like you are.

Hosting in store events are powerful opportunities to entice this crowd. This can be anything from concerts, charity nights, or an in-house stylist to offer individualised advice. Hit them with some powerful visual displays, captivating aromas, mood music: essentially make it worth it to leave the PJs at home. Generation Z requires this sort of individualised attention and the need to feel they are seeing something that is both trendy, useful, and a unique experience.

5. Shifts in social media use

Heard of Lily Singh (YouTube Channel: Superwoman) yet? She is not just a social commentator, singer, and writer but also a fashion icon for most Gen Z in India today. Digital natives are incredibly socially conscious and practical, and it shows up in a change in the way they manage their social media accounts. If a post does not receive enough likes, it is deleted and later reposted to increase the number of likes. Access to the knowledge of how many people actively approve of your post means that this generation will remove any evidence of a failed post. Social Media accounts allow digital natives to portray themselves in a certain light and gives a vast amount of information about other people’s interests and self-image. In a way, they are creating their own mini marketing plans to showcase their life.

When your browser can track your interests and choose a product you probably want, it’s a lot easier to buy something without thinking it through. This phenomenon targets and personalises ads to fit the individual buyer. YouTube is the most popular social media account for this generation, which is actually cutting back Facebook usage. Companies need to focus on targeted ads on YouTube videos and make sure their Facebook advertisements are eye-catching when these young people do log in.

6. Authenticity over constructed perfection

Digital natives know every trick in the book about filters and the finesse of a perfectly contrasted Instagram photo. They grew up understanding that everything around them is trying to sell something. Maybe because they have spent so much of their young life connecting via screens, they are searching for something real. Studies have found that Generation Z prefers watching stories about real people on YouTube to reality TV.

Authenticity is becoming the new perfectionism. A number of well-known brands took note of this trend and a noteworthy shift portraying real people instead of heavily edited photos has already started. Aerie, American Eagle's lingerie store that targets younger women, started a campaign that ended the retouching of their models. This campaign began over a year ago and now their sales are up by 32 percent. This allows the consumer to feel they aren’t being lied to and that a certain image is actually attainable. Dove is another brand which has done it beautifully and for a while now. Reality and skin(makeup)less or natural will be (is already!) the new norm. Businesses have to shift to fit the desires of the newest audience.

Being honest and straightforward is important in a time where every part of the business of buying and selling is transparent.

This honestly goes beyond images to marketing schemes as well. This generation is not interested in the sleazy marketing plans of yesteryear. They don’t believe they will have six girlfriends if they spritz some cologne or that buying a certain car increases your social status. They respond more to honest campaigns that are contributing something to the world.

7. Take a stand

This is a generation born into vast amounts of knowledge surrounding terrorism, climate change, racial inequality, and feminism. Millennials brought sustainability to the global conversation but digital natives are actually compelled to do something about it. This newly minted socially conscious consumer knows how to access information about sustainable business practices and will not hesitate to boycott a brand if it doesn’t follow their personal agenda.

Gen z consumers follow the companies that are clear about their mission to actively make the world a better place.

A survey conducted by Masdar** asked 5,000 digital natives in 20 countries worldwide their opinions on sustainability and climate change. They found that 40 percent of Gen Z think that, “climate change will be the biggest threat to the world over the next 10 years, ahead of the economy and the threat of terrorism.” Unlike the millennials, nearly 46 percent of this group are actively recycling, reducing energy consumption, and using low-energy goods. This transfers into their nature as consumers. They will not work with brands that ignore the importance of sustainability and low-energy alternatives. These will touch a chord with the natives.

Finally.

8. Make a point of getting to the point

These young consumers are accustomed to tweetable, bite-sized (well, till the Fidget Spinner spins kinda) chunks of information. They are not looking for lengthy text descriptions. The eyes go straight for the important bits and skim the rest. The key to getting their attention is something visual and eye-catching; make your entire website look like the bold subtext. That should work. According to a Bloomberg report, “This new generation has an eight-second attention span, down from 12 seconds in 2000, and 11 percent are diagnosed with attention deficiency syndrome, compared to 7.8 percent in 2003.”

This means they want information to be both concise and informative. Use captivating visuals and videos to display your brands story and avoid creating lengthy articles they will ignore.

Summary:

Re-aligning your business outlook and methods to reach this consumer is becoming increasingly important as Gen Z steadily grows to make up the majority of the market. In less than 10 years, these digital natives will hold most of the buying power globally. They are a crafty bunch armed with the power of technology and the decided ability to predict future trends and spending habits. A self-reliant pragmatist, this generation is not looking to fall into a world of preset prescriptions.

Businesses need to find creative means of adjusting retail both online and in-store to tell honest, sustainable, visually stimulating stories. Brands need to work towards selling more than a design. Generation Z is on the constant pursuit of designs that sell a sustainable future, a political stance, and a unique image. They are writing their own stories, finding the perfect balance of new and old fashions to create something new. This group is impossible to ignore and are sure to leave an impact on whatever Generation might follow Z—but for now, this is the consumer of the future, so at least for eight seconds, pay attention—and do learn to dab!